Differential Analysis for a Discontinued ProductA condensed income statement by product line for Warrick Beverage Inc. indicatedthe following for Mango Cola for the past year:Sales$15,000,000Cost of goods sold(10,800,000)Gross profit$4,200,000Operating expenses(8,000,000)>) Operating loss$(3,800,000)It is estimated that 30% of the cost of goods sold represents fixed factory overheadcosts and that 25% of the operating expenses are fixed. Because Mango Cola is onlyone of many products, the fixed costs will not be materially affected if the product isdiscontinued.a. Prepare a differential analysis dated February 29 to determine whether MangoCola should be continued (Alternative 1) or discontinued (Alternative 2). If anamount is zero, enter "0". If required, use a minus sign to indicate a loss.Differential AnalysisContinue (Alt. 1) or Discontinue (Alt. 2) Mango ColaFebruary 29ContinueDiscontinueDifferentialMango ColaEffectsMango Cola(Alternative 1) (Alternative 2) (Alternative 2)RevenuesCosts:Variable cost of goods soldVariable operating expensesFixed costsProfit (Loss)b. Should Mango Cola be retained?

Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year: Sales $15,000,000 Cost of goods sold (10,800,000) Gross profit $4,200,000 Operating expenses (8,000,000) Operating loss $(3,800,000) It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 25% of the operating expenses are fixed. Because Mango Cola is only

Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year: Sales $15,000,000 Cost of goods sold (10,800,000) Gross profit $4,200,000 Operating expenses (8,000,000) Operating loss $(3,800,000) It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 25% of the operating expenses are fixed. Because Mango Cola is only

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3E: Differential analysis for a discontinued product A condensed income statement by product line for...

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